Einstein Bros 2005 Annual Report Download - page 36

http://www.sec.gov/Archives/edgar/data/949373/000110465906016136/a06-3178_110k.htm[9/11/2014 10:13:03 AM]
We record deferred tax assets and liabilities based on the difference between the financial statement and income tax basis of assets and
liabilities using the enacted statutory tax rate in effect for the year differences are expected to be taxable or refunded. Deferred income tax
expenses or credits are based on the changes in the asset or liability from period to period. The recorded deferred tax assets are reviewed for
impairment on a quarterly basis by reviewing our internal estimates for future net income. If we determine it to be more likely than not that the
recovery of the asset is in question in the immediate, foreseeable future, we record a valuation allowance. On January 3, 2006 and December 28,
2004, we recorded a full valuation allowance against our net deferred tax asset. We will continue to record valuation allowances against additional
deferred tax assets until such time that recoverability of such assets is demonstrated.
The provision (benefit) for income taxes reflected in our consolidated statements of operations represents minimum state taxes payable.
Net Loss per Common Share
In accordance with SFAS No. 128, “Earnings per Share,” we compute basic net loss per common share by dividing the net loss for the period
by the weighted average number of shares of common stock outstanding during the period (which includes warrants exercisable for a nominal price
of $0.01 per share on a pre-split basis prior to our equity recapitalization further described in Note 13).
Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of common stock and
potential common stock equivalents outstanding during the period, if dilutive. Potential common stock equivalents include incremental shares of
common stock issuable upon the exercise of stock options and warrants. The effects of potential common stock equivalents have not been included
in the computation of diluted net loss per share as their effect is anti-dilutive.
The following table summarizes the weighted average number of common shares outstanding, as well as sets forth the computation of basic
and diluted net loss per common share for the periods indicated (in thousands of dollars, except share and per share data):
For the years ended:
January 3, December 28, December 30,
2006 2004 2003
Weighted average shares outstanding
9,878,665 9,842,414 3,873,284
Net loss available to common stockholders
$ (14,018) $ (17,405) $ (87,944)
Basic and diluted net loss per share
$ (1.42) $ (1.77) $ (22.71)
Shares contingently issuable included in the weighted average
number of shares of common stock
— — 604,298
Stock options and warrants to purchase an aggregate of 1,737,113, 1,764,372 and 1,832,679 shares of common stock were outstanding as of
January 3, 2006, December 28, 2004 and December 30, 2003, respectively. These stock options and warrants were not included in the computation
of diluted earnings per share because their effect would have been anti-dilutive.
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NEW WORLD RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Stock-Based Compensation
We apply the intrinsic value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees (APB No. 25), and related interpretations, in accounting for our fixed award stock options to our associates. As such,
compensation expense is recorded only if the current market price of the underlying common stock exceeded the exercise price of the option on the
date of grant. We apply the fair value-basis of accounting as prescribed by SFAS No. 123, Accounting for Stock-Based Compensation (SFAS
No. 123) in accounting for our fixed award stock options to our consultants. Under SFAS No. 123, compensation expense is recognized based on
the fair value of stock options granted.
Had compensation cost for stock options granted to associates been determined on the basis of fair value using the following assumptions, net
loss and loss per share would have been increased to the following pro forma amounts (in thousands of dollars, except per share amounts):
For the year ended:
January 3, December 28, December 30,
2006 2004 2003
Net loss, as reported
$ (14,018) $ (17,405) $ (87,944)
Deduct: fair value based compensation expense (1,164) (544) (10)
Pro forma net loss
(15,182) (17,949) (87,954)